THE LIBOR Thread (merged)

[Jotapay]

Who's going to be the Freedom Hater?

[shortonoil]

Jotapay said:

Who's going to be the Freedom Hater?

I don’t know if Iran is still holding its stash of T-bills, but it would make a good excuse for mr. fear and misery to kill a few hundred thousand Iranians.

Let’s just hope that doesn’t happen. The karma is getting a little tattered over here on this side of the pond.

[shady28]

DantesPeak said:

If they resort to something like that, it could become a trigger for a worldwide dollar meltdown. It may not be too far away based upon the figures in the TIC report shortonoil quoted above.

To get this ball rolling all it would take is one SWF to panic and start dumping Treasuries. That would most likely over burden the system until it would start a cascade of dumping ending in a worthless US currency.

There is a bad assumption at the heart of thinking that dumping treasuries will cause the dollar to devalue. Right now, there is more demand for treasuries than there are treasuries. If they liquidate their treasuries, they have plenty of buyers. Pray tell, what will they do with those dollars they get? Convert to another currency or different governments debt? Or do you have some forlorn hope that they will buy gobs of gold, thus destroying not only the US currency system but their own as well? You think they will shoot themselves in the head?

The reason the Fed asked the Treasury to make more debt - so they could liquidate it and inject cash into the economy. All the money that normally was going into other asset classes has gravitated to safe havens - specifically treasuries.

Every shred of evidence out there shows that the Fed has been battling a deflationary typhoon - and they are losing big. If they were not losing, credit and asset markets would not be locked up as they are now.

[Dreamtwister]

safe havens - specifically treasuries.

The 3 month bond rate yesterday was 0.05%. Even the 30 year rate today is only 4.35% - FAR LOWER than even the stated inflation rate.

Safe haven? Dude, you should do stand-up.

[shady28]

safe havens - specifically treasuries.

The 3 month bond rate yesterday was 0.05%. Even the 30 year rate today is only 4.35% - FAR LOWER than even the stated inflation rate.

Safe haven? Dude, you should do stand-up.

Give us your safe haven, dude...

What are you into? Gold? Lets see how that does in 6 months vs treasuries.

[Dreamtwister]

safe havens - specifically treasuries.

The 3 month bond rate yesterday was 0.05%. Even the 30 year rate today is only 4.35% - FAR LOWER than even the stated inflation rate.

Safe haven? Dude, you should do stand-up.

Give us your safe haven, dude...

What are you into? Gold? Lets see how that does in 6 months vs treasuries.

Gold is good, but my wealth preservation strategy is heavily leveraged into lead and copper.

[Revi]

They seem to be minting lots of money to prop up dying banks. Why won't this cause inflation? Is it because it is never in the hands of us little people at all?

Nobody lending any money means none is being created.

They are just trying to stave off total financial freeze up.

Is it working?

[DantesPeak]

The $100 billion the Treasury raised in special issues this week has been mostly deposited with the Fed. The Fed apparently has directly lent most of this money back to banks and brokers.

To over simplify then, the Treasury has acted as a second Federal Reserve and created $100 billion in new money. That's because the Treasury has facilitated the financing of $100 billion in assets formerly just owned by banks/brokers and now 100% financed by the Fed.

This is in addition to the creation of $300 billion in new money, mostly in dollars - even in Europe. The combined effects of the new money will have powerful effects on some asset classes at first, and will eventually bleed into the world economy - causing widespread inflation.

It takes about two years for the effects of monetary expansion to be fully reflected in retail prices. The price of basic commodities like gold, oil, grains are likely to rise first.

[shady28]

safe havens - specifically treasuries.

The 3 month bond rate yesterday was 0.05%. Even the 30 year rate today is only 4.35% - FAR LOWER than even the stated inflation rate.

Safe haven? Dude, you should do stand-up.

Give us your safe haven, dude...

What are you into? Gold? Lets see how that does in 6 months vs treasuries.

Gold is good, but my wealth preservation strategy is heavily leveraged into lead and copper.

Then let's watch lead and copper, and see how well they do over the next 6 months or so vs treasuries.

You might want to research the reason why treasury yields would be so low.

[Jotapay]

Then let's watch lead and copper, and see how well they do over the next 6 months or so vs treasuries.

You might want to research the reason why treasury yields would be so low.

You know what lead and copper are used to make, right? It doesn't trade on a market. You academics.... you better learn sometime, for your own sakes.

It amazes me how out of touch you people are sometimes.

[Revi]

What are lead and copper used to make? Are you talking about old plumbing?

The market is down again. It's below 11,000.

Looks like the bottom is falling out of the economy again.

[ubercrap]

What are lead and copper used to make? Are you talking about old plumbing?

I thought maybe he was referring to ammunition?

[Jotapay]

Bullets, along with some powder and primers.

[jbrovont]

Philosophy and knowledge make a man wise and his law just. Copper and lead make him free.

What are lead and copper used to make? Are you talking about old plumbing?

The market is down again. It's below 11,000.

Looks like the bottom is falling out of the economy again.

[jbrovont]

Back on topic, many ARMs are based on the LIBOR. A sudden jump in this could cause their payment to jump along with it. I'm not sure what happens to an ARM based on the LIBOR when it locks up - I've seen a lot of mortgage notes and I've never seen that addressed.

[Dreamtwister]

What are lead and copper used to make?

[Delphis]

Philosophy and knowledge make a man wise and his law just. Copper and lead make him free.

What are lead and copper used to make? Are you talking about old plumbing?
The market is down again. It's below 11,000. Looks like the bottom is falling out of the economy again.

Words to live by JB, to be sure.

[Ferretlover]

Greenspan’s Libor Barometer Shows Markets Stay Frozen (Update2) by Gavin Finch and Liz Capo McCormick, 23 Feb 2009:
Feb. 23 (Bloomberg) -- For all the $9.7 trillion pledged by the U.S. to combat the financial crisis, money markets show the world’s biggest banks see no recovery before 2010.
The premium banks charge each other for short-term loans, the so-called Libor-OIS spread, rose above 1 percentage point last week for the first time since Jan. 9. Contracts traded in the forward market indicate the gauge, which measures banks reluctance to lend, will remain higher for the rest of the year than before Sept. 15, when the bankruptcy of Lehman Brothers Holdings Inc. froze credit markets. …
The stress is all reflected in the Libor-OIS spread, which measures the gap between the London interbank offered rate in dollars for three months and the overnight index-swap rate, or what traders expect the Fed’s target rate for overnight loans between banks to average over the term of the contract. …

Bloomberg

[Ferretlover]

Key US Dollar Libor Rate Falls To Another Record Low by Keith Jenkins Of DOW JONES NEWSWIRES:

LONDON (Dow Jones)--The cost of borrowing longer-term U.S. dollars in the London interbank market continued to fall in holiday-thinned trading Friday, with the key three-month rate again setting a new record low. Market activity was subdued, with U.S. markets closed for the Independence Day holiday.
Data from the British Bankers' Association showed three-month dollar Libor, seen as a key gauge of the effectiveness of the Federal Reserve's monetary policy, dropped to 0.55875% from Thursday's 0.5775%, marking its lowest rate since the advent of BBA Libors back in 1986.
The three-month rate peaked at 4.81875% on Oct. 10. ...
Euro Libor rates headed lower after European Central Bank President Jean-Claude Trichet reinforced market expectations that ECB official interest rates were set to remain low for a prolonged period.
Speaking at the ECB's monthly press conference Thursday, Trichet said he was pleased with recent developments in liquidity, specifically the outcome of last week's 12-month long-term refinancing operation, which injected EUR442 billion into the system.
As far as interest rates are concerned, analysts at BNP Paribas said there is no scope for any move at upcoming ECB policy meetings. "The status quo will prevail for a long period," they added. …

WSJ

[dorlomin]

http://www.ft.com/cms/s/0/7021cdb4-527a ... z1mBKMPXcb

More than a dozen traders and brokers in London and Asia have been fired, suspended or put on leave by their employers as a multinational probe into alleged manipulation of crucial global lending rates accelerates.

Regulators have been investigating US and European banks that help set interbank lending rates in London and Tokyo since late 2010, in an intensive profile inquiry that spans three continents and involves at least nine separate enforcement agencies.

According to people familiar with the probe, traders have also been suspended, fired or placed on leave in recent months at Deutsche Bank, JPMorgan Chase, Royal Bank of Scotland and Citigroup. All four banks declined to comment.

Regulators are seeking to determine whether banks colluded to set the overnight lending rates known as Libor, Tibor and Euribor, and whether traders within the banks and their clients improperly used information on what future rates would be to place profitable trades. The rates, which serve as a benchmark for $350tn worth of financial products worldwide, are set by a daily poll of a panel of banks in each region.